When did Texas treat installed draperies or curtains as taxable personal property rather than an improvement to realty?

Plain-English summary

Installed draperies and curtains were usually treated as tangible personal property, making the sale and installation taxable. The letter said installation labor in that setting became taxable October 1, 1987, and the full labor-and-material price was taxable when cabinets or draperies were sold without installation.

Draperies or curtains instead became improvements to realty when they were permanently attached and integrated so removal would substantially damage the realty, or when a contractor installed them as part of new construction or remodeling. Wallpaper and cabinets sold and installed were treated as improvements to realty.

For improvement-to-realty work, a lump-sum contractor paid tax to suppliers on materials and did not tax the customer charge. Under a separated contract, the contractor collected tax on separately stated incorporated materials, subject to the prime-contract rules described in the letter. Items consumed but not incorporated remained taxable to the contractor at purchase.

What this means for you

The historical classification depended on attachment and construction context, not simply whether an item was physically installed. Contract pricing then determined who paid or collected tax on incorporated materials.

Common questions

Were installed draperies and curtains normally taxable? Yes. The letter normally treated them as tangible personal property.

When could they be improvements to realty? When permanently integrated so removal would substantially damage the realty, or when installed by a contractor as part of construction or remodeling.

How did a lump-sum contract work? The contractor paid tax to the supplier on materials, and the customer or prime-contractor charge was not taxable.

How did a separated contract work? The contractor collected tax on the separately stated charge for materials incorporated into the realty, with different resale-certificate treatment depending on the prime contract.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8710L0834D05

Original ruling text

October 13, 1987

Dear **:

Thank you for your letter regarding the tax responsibilities of a contractor
making improvements to realty.

The charge for labor associated with the sale and installation of
draperies/curtains as tangible personal property became taxable effective
October 1, 1987.

The total cost of labor and material to make cabinets and draperies/curtains is
subject to tax as part of the price of the finished product when these items
are not installed.

Draperies and/or curtains are usually not regarded as improvement to realty,
but rather the sale and installation of tangible personal property.
Drapery/curtain sale and installation is regarded as improvement to realty
when: 1) the draperies/curtains are so permanently attached and integrated into
the realty that removal would substantially damage the realty. 2) the
installation of draperies/curtains is taking place in a construction context
with the contractor being responsible for installation as a part of the
contract. This could be new construction or remodeling of a building or house.

The sale and installation of wallpaper and cabinets is improvement to realty.

When you sell and install draperies/curtains, wallpaper and cabinets as
improvement to realty, you are required to operate under the sales tax rules
that apply to contractors and the following applies.

Your contract with the customer or with the prime contractor will either be a
lump-sum or a separated contract.

Under a lump-sum contract, you are the consumer of all materials and pay tax to
the supplier at the time of purchase. The charge to your customer or the
contractor is not taxable.

Under a separated contract you have with a customer, you must collect sales tax
from the customer on the separately stated charge for materials that are
incorporated into the realty. If your separated contract is with the prime
contractor, you must collect tax from the contractor on these materials, if the
contract between the prime contractor and the customer is a lump-sum contract.
You may accept a resale certificate in lieu of tax from the contractor if the
prime contract is a separated contract.

In all cases you are required to pay tax at the time of purchase on items that
will be used or consumed in performance of the job, but that will not become
incorporated into the realty.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,

Eddie C. Washington
Tax Policy Division